China boosted its presence in the ex-Soviet bloc's commodities sector on Tuesday by lending over $1 billion to Belarus just a day after signing two large deals in Kazakhstan, another former Soviet republic. A bulk of funds provided to Belarus will be used to build a cellulose plant which may then export its produce to China, the Belarussian government said, while Monday's Kazakh deals included a loan to a major copper producer.
The two large investments in countries flanking Russia to the east and the west marked the beginning of Chinese President Hu Jintao's tour across the region during which he is visiting Kazakhstan, Russia and Ukraine. And for Belarus, whose government is struggling to keep a currency crisis in check, deals with China provide not only much-needed investment, but also an important counterbalance to Moscow's growing influence.
Chinese banks will lend Belarus over $1 billion to finance industrial and infrastructure projects, the Belarussian government said on Tuesday. The deal is likely to be linked to supplies of Chinese goods and services and thus contribute very little towards Belarus's efforts to plug its large current account deficit.
But the investments could help the Minsk government prop up economic activity at a time when it is cutting spending and tightening monetary policy. China's Eximbank and the Industrial and Commercial Bank of China will provide $654 million towards a $700 million cellulose plant construction project as well as $340 million for a road improvement project, Deputy Prime Minister Anatoly Tozik said.
The banks will also finance a smaller railroad electrification project, he said. The plant, due to be built in two years, will have the capacity to produce 400,000 tonnes per year of bleached cellulose, used in paper and cardboard production. Belarus consumes just 200,000 tonnes a year. "We are discussing the possibility of repaying the loan by supplying extra cellulose to China," Tozik said.
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